Boglehead Anniversary/1-Year Portfolio Review...

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buldogge
Posts: 54
Joined: Fri Oct 07, 2016 10:06 am

Boglehead Anniversary/1-Year Portfolio Review...

Post by buldogge » Tue Oct 10, 2017 11:46 pm

It's been (just over) a year since I first posted to Bogleheads, asking for advice/help in transferring and straightening out my existing investments (see here: viewtopic.php?f=1&t=201119&p=3094140#p3094140 ).

I did get all my accounts transferred and/or set-up @ Vanguard.

Other things have changed slightly...

-The income from my business has increased, after my business partner moved out of state (this has pushed us very close to the ROTH limit).
-I have just this month gotten my wife to get her 403b back in order...she will max (80% allowed) deferrals for the rest of the year, and then adjust to max at $18k, next year.
-I have been maxing my Solo 401k, Company has been contributing 25% to SEP-IRA, and I have been sending at least $1k to taxable/month.

Annual Gross Income: ~$200k (fluctuates, as I am a small business owner and not directly salaried thru main business, but do receive W-2 thru 2nd/sub business).
Emergency funds: ~6 months
Debt: We are basically debt free, but do have private school education
Tax Filing Status: Married Filing Jointly
State of Residence: Missouri
Age: 49
Desired Asset allocation: 70% stocks / 30% bonds (but currently 75/25)
Desired International allocation: 25% of stocks

(His only)
Current taxable assets, ~$79k
Current retirement assets ~$178k

This is what I have ended up with at Vanguard, so far:

Taxable

VWITX Vanguard Intermediate-Term Tax-Exempt Fund Investor Shares (4.64%)
VWLTX Vanguard Long-Term Tax-Exempt Fund (3.28%)
VTIAX Vanguard Total International Stock Index Fund Admiral Shares (5.73%)
VTSAX Vanguard Total Stock Market Index Fund Admiral Shares (17.10%)

tIRA (rollover)

VGSIX Vanguard REIT Index Fund Investor Shares (2.53%)
VBTLX Vanguard Total Bond Market Index Fund Admiral Shares (10.03%)
VTIAX Vanguard Total International Stock Index Fund Admiral Shares (8.15%)
VTSAX Vanguard Total Stock Market Index Fund Admiral Shares (15.17%)
VIOV VANGUARD S&P SMALL CAP 600 VALUE ETF (2.06%)

SEP-IRA

VASGX Vanguard LifeStrategy Growth Fund (10.05%)

ROTH IRA

VGTSX Vanguard Total International Stock Index Fund Investor Shares (1.81%)
VTSAX Vanguard Total Stock Market Index Fund Admiral Shares (4.78%)
VIOV VANGUARD S&P SMALL CAP 600 VALUE ETF (2.26%)

Solo 401k

VGSIX Vanguard REIT Index Fund Investor Shares (1.10%)
VBMFX Vanguard Total Bond Market Index Fund Investor Shares (4.81%)
VGTSX Vanguard Total International Stock Index Fund Investor Shares (1.59%)
VTSMX Vanguard Total Stock Market Index Fund Investor Shares (4.91%)

Thoughts?
Suggestions??

TIA
Mark in St. Louis
Last edited by buldogge on Wed Oct 11, 2017 12:49 pm, edited 1 time in total.

bloom2708
Posts: 2667
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: Boglehead Anniversary/1-Year Portfolio Review...

Post by bloom2708 » Wed Oct 11, 2017 9:42 am

Happy 1 year anniversary.

I do not see anything I would change. Funds look great.

Continue investing, re-balance once a year.

I think you have a typo in your current asset allocation 75/35. I assume this is 75/25 and moving to 70/30. Very reasonable. Move toward 60/40 over the next years as the investments grow.
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead

MotoTrojan
Posts: 699
Joined: Wed Feb 01, 2017 8:39 pm

Re: Boglehead Anniversary/1-Year Portfolio Review...

Post by MotoTrojan » Wed Oct 11, 2017 10:42 am

Overall great fund choices (I really like VIOV and hold that along with VTI & VXUS).

Nothing wrong with REITs, but at such a small % of your portfolio, I wouldn't hesitate to simplify that, or consider weighting them higher. Similar thought with VIOV honestly; not sure it is worth the trouble until you have 20%+ of equities in SCV.

Lifestrategy fund is fine in an IRA, but if you find this makes calculating your AA or rebalnacing any more difficult, you could consider absorbing this into your 3-fund.

Lastly, what is the intent of the tax-exempt bond funds in taxable? If these are for near-term spending, then all is well. If you are just trying to maintain your AA in each account, I'd suggest you consider thinking about your portfolio as one entity. Total US and Total International are both very tax-efficient (Total US beats International with its lower dividend yield, but International has a tax-credit which offsets that). VIOV is also quite tax-efficient. Bonds do best in a tax-deferred account, and then I'd use remaining tax-deferred and Roth space to enable rebalancing tax-free. No reason to replicate your AA in each individual account. A GoogleSheet using GoogleFinance (pulls in pricing) can be setup as a very handy way to check balance. I have mine setup to also allow me to input a contribution amount, and have it suggest roughly how many shares of each fund to add to each account.

buldogge
Posts: 54
Joined: Fri Oct 07, 2016 10:06 am

Re: Boglehead Anniversary/1-Year Portfolio Review...

Post by buldogge » Wed Oct 11, 2017 12:51 pm

bloom2708 wrote:
Wed Oct 11, 2017 9:42 am
Happy 1 year anniversary.

I do not see anything I would change. Funds look great.

Continue investing, re-balance once a year.

I think you have a typo in your current asset allocation 75/35. I assume this is 75/25 and moving to 70/30. Very reasonable. Move toward 60/40 over the next years as the investments grow.
Thanks...I fixed the typo.

I will move towards 60/40 over the next 7 years (or so).

TA
-Mark

buldogge
Posts: 54
Joined: Fri Oct 07, 2016 10:06 am

Re: Boglehead Anniversary/1-Year Portfolio Review...

Post by buldogge » Wed Oct 11, 2017 1:06 pm

MotoTrojan wrote:
Wed Oct 11, 2017 10:42 am
Overall great fund choices (I really like VIOV and hold that along with VTI & VXUS).

Nothing wrong with REITs, but at such a small % of your portfolio, I wouldn't hesitate to simplify that, or consider weighting them higher. Similar thought with VIOV honestly; not sure it is worth the trouble until you have 20%+ of equities in SCV.

Lifestrategy fund is fine in an IRA, but if you find this makes calculating your AA or rebalnacing any more difficult, you could consider absorbing this into your 3-fund.

Lastly, what is the intent of the tax-exempt bond funds in taxable? If these are for near-term spending, then all is well. If you are just trying to maintain your AA in each account, I'd suggest you consider thinking about your portfolio as one entity. Total US and Total International are both very tax-efficient (Total US beats International with its lower dividend yield, but International has a tax-credit which offsets that). VIOV is also quite tax-efficient. Bonds do best in a tax-deferred account, and then I'd use remaining tax-deferred and Roth space to enable rebalancing tax-free. No reason to replicate your AA in each individual account. A GoogleSheet using GoogleFinance (pulls in pricing) can be setup as a very handy way to check balance. I have mine setup to also allow me to input a contribution amount, and have it suggest roughly how many shares of each fund to add to each account.
Hey...Thanks for the reply.

The REITS will rise to 7% as additional Solo 401k contributions/deferrals are made.

The VIOV will increase as additional ROTH contributions are made. If I lose my ROTH eligibility, then I will have to take a different approach. Unfortunately, since ETFs cannot be bought in Vanguard Individual 401k plans, that limits my access to VIOV (in an effective manner). I believe I can roll the SEP-IRA in the tIRA and could then make effective use of those funds to purchase the necessary amount of VIOV. I could also sell/exchange some tIRA VTSAX funds and then purchase VIOV (and then sell/exchange into some VTSAX in the SEP-IRA).

I did not realize or understand that VIOV was tax-efficient and appropriate for taxable accounts...I will take that into consideration, as well.

TBH, the Lifestrategy fund is a remnant of the first account/action at Vanguard, before the account had sufficient funds to create a 3-fund portfolio.

I must admit, I don't have a good answer for the tax-exempt bonds...as our tax bracket has crept up, I added the bonds in. I found the portfolio creeping heavier and heavier to equities, as the market has done well...so I started purchasing some tax-exempt bonds as part of my monthly taxable buy.

-Mark

MotoTrojan
Posts: 699
Joined: Wed Feb 01, 2017 8:39 pm

Re: Boglehead Anniversary/1-Year Portfolio Review...

Post by MotoTrojan » Wed Oct 11, 2017 1:55 pm

buldogge wrote:
Wed Oct 11, 2017 1:06 pm
MotoTrojan wrote:
Wed Oct 11, 2017 10:42 am
Overall great fund choices (I really like VIOV and hold that along with VTI & VXUS).

Nothing wrong with REITs, but at such a small % of your portfolio, I wouldn't hesitate to simplify that, or consider weighting them higher. Similar thought with VIOV honestly; not sure it is worth the trouble until you have 20%+ of equities in SCV.

Lifestrategy fund is fine in an IRA, but if you find this makes calculating your AA or rebalnacing any more difficult, you could consider absorbing this into your 3-fund.

Lastly, what is the intent of the tax-exempt bond funds in taxable? If these are for near-term spending, then all is well. If you are just trying to maintain your AA in each account, I'd suggest you consider thinking about your portfolio as one entity. Total US and Total International are both very tax-efficient (Total US beats International with its lower dividend yield, but International has a tax-credit which offsets that). VIOV is also quite tax-efficient. Bonds do best in a tax-deferred account, and then I'd use remaining tax-deferred and Roth space to enable rebalancing tax-free. No reason to replicate your AA in each individual account. A GoogleSheet using GoogleFinance (pulls in pricing) can be setup as a very handy way to check balance. I have mine setup to also allow me to input a contribution amount, and have it suggest roughly how many shares of each fund to add to each account.
Hey...Thanks for the reply.

The REITS will rise to 7% as additional Solo 401k contributions/deferrals are made.

The VIOV will increase as additional ROTH contributions are made. If I lose my ROTH eligibility, then I will have to take a different approach. Unfortunately, since ETFs cannot be bought in Vanguard Individual 401k plans, that limits my access to VIOV (in an effective manner). I believe I can roll the SEP-IRA in the tIRA and could then make effective use of those funds to purchase the necessary amount of VIOV. I could also sell/exchange some tIRA VTSAX funds and then purchase VIOV (and then sell/exchange into some VTSAX in the SEP-IRA).

I did not realize or understand that VIOV was tax-efficient and appropriate for taxable accounts...I will take that into consideration, as well.

TBH, the Lifestrategy fund is a remnant of the first account/action at Vanguard, before the account had sufficient funds to create a 3-fund portfolio.

I must admit, I don't have a good answer for the tax-exempt bonds...as our tax bracket has crept up, I added the bonds in. I found the portfolio creeping heavier and heavier to equities, as the market has done well...so I started purchasing some tax-exempt bonds as part of my monthly taxable buy.

-Mark
Do some searching but VIOV historically has been about as tax-efficient as VTI; I believe I saw some numbers stating it was actually better off, given that it has a lower dividend-yield and doesn't throw off any capital-gains. Also there are some liquidity concerns due to low-volume, but the arbitrage with IJS makes this a minimal concern in my eyes, unless you have a 7-figure holding and think you'd want to TLH the entire thing in a day.

As to the Roth eligibility, a backdoor Roth is pretty easy, unless you have a lot of pre-tax IRAs (sounds like you do) with gains.

With the bonds, what you have setup isn't totally bad, but if you don't plan to use those bonds near-term, you are definitely getting a bigger drag on your fixed-income returns vs. tax-deferred Total Bond or similar. As mentioned, you'd be better off with only broad-based equity funds in taxable, and then putting all bonds (along with more equities) in your tax-deferred space (and I like to be all equities in Roth).

buldogge
Posts: 54
Joined: Fri Oct 07, 2016 10:06 am

Re: Boglehead Anniversary/1-Year Portfolio Review...

Post by buldogge » Thu Oct 12, 2017 11:04 am

MotoTrojan wrote:
Wed Oct 11, 2017 1:55 pm
Do some searching but VIOV historically has been about as tax-efficient as VTI; I believe I saw some numbers stating it was actually better off, given that it has a lower dividend-yield and doesn't throw off any capital-gains. Also there are some liquidity concerns due to low-volume, but the arbitrage with IJS makes this a minimal concern in my eyes, unless you have a 7-figure holding and think you'd want to TLH the entire thing in a day.

As to the Roth eligibility, a backdoor Roth is pretty easy, unless you have a lot of pre-tax IRAs (sounds like you do) with gains.

With the bonds, what you have setup isn't totally bad, but if you don't plan to use those bonds near-term, you are definitely getting a bigger drag on your fixed-income returns vs. tax-deferred Total Bond or similar. As mentioned, you'd be better off with only broad-based equity funds in taxable, and then putting all bonds (along with more equities) in your tax-deferred space (and I like to be all equities in Roth).
My tIRA is 100% pre-tax...rollover SIMPLE IRA/Solo 401k accounts.

TA
-Mark

MotoTrojan
Posts: 699
Joined: Wed Feb 01, 2017 8:39 pm

Re: Boglehead Anniversary/1-Year Portfolio Review...

Post by MotoTrojan » Thu Oct 12, 2017 12:19 pm

buldogge wrote:
Thu Oct 12, 2017 11:04 am
MotoTrojan wrote:
Wed Oct 11, 2017 1:55 pm
Do some searching but VIOV historically has been about as tax-efficient as VTI; I believe I saw some numbers stating it was actually better off, given that it has a lower dividend-yield and doesn't throw off any capital-gains. Also there are some liquidity concerns due to low-volume, but the arbitrage with IJS makes this a minimal concern in my eyes, unless you have a 7-figure holding and think you'd want to TLH the entire thing in a day.

As to the Roth eligibility, a backdoor Roth is pretty easy, unless you have a lot of pre-tax IRAs (sounds like you do) with gains.

With the bonds, what you have setup isn't totally bad, but if you don't plan to use those bonds near-term, you are definitely getting a bigger drag on your fixed-income returns vs. tax-deferred Total Bond or similar. As mentioned, you'd be better off with only broad-based equity funds in taxable, and then putting all bonds (along with more equities) in your tax-deferred space (and I like to be all equities in Roth).
My tIRA is 100% pre-tax...rollover SIMPLE IRA/Solo 401k accounts.

TA
-Mark
Then you'd have to pay taxes on earnings if you wanted to convert this to a Roth, enabling you to contribute the max to a Roth for the rest of your life (assuming no regulatory changes, or other pre-tax rollovers).

I've never contributed pre-tax, so for me there essentially is no Roth conversion limit. This year I knew I'd be over the limit, so I contributed $5500 to non-deductible IRA and then converted it. Gains in time to convert are minimal/none, so no real taxes.

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